Scandecor Developments AB v Scandecor Marketing AB

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD NICHOLLS OF BIRKENHEAD,LORD STEYN,LORD HOBHOUSE OF WOODBOROUGH,LORD MILLETT,LORD SCOTT OF FOSCOTE
Judgment Date04 April 2001
Neutral Citation[2001] UKHL 21
Date04 April 2001

[2001] UKHL 21

HOUSE OF LORDS

Lord Nicholls

Lord Steyn

Lord Hobhouse of Wood- Borough

Lord Millett

Lord Scott of Foscote

Scandecor Developments AB
(Appellants)
and
Scandecor Marketing AB

And Others

(Respondents)

And One Other Appeal

LORD NICHOLLS OF BIRKENHEAD

My Lords,

1

In 1967 Bertil Hjert and Goran Huldtgren were art students together at Uppsala University. They saw an opening for the sale of art posters, particularly to students and other young people. They set up a company in Sweden, known later as Scandecor International AB. They owned the company equally, and they ran it together, publishing and selling posters and related goods. They used the name Scandecor as a brand name. Scandecor is an invented composite word derived from 'Scandinavian decor'.

2

The business prospered, until it claimed to be one of the largest poster businesses in the world. Mr Huldgtren was responsible for sales in the United Kingdom, Ireland, the Scandinavian countries and the United States. Mr Hjert was responsible for continental countries, including France and Germany. Local subsidiary companies, using the word Scandecor as part of their names, were set up to act as distributors. The United Kingdom company was Scandecor Ltd. Two trademarks were registered in this country: a word mark 'Scandecor', and a logo mark incorporating the word Scandecor within a lozenge shaped border. They were registered in Class 16, in respect of items such as posters, calendars, cards and printed art reproductions. In April 1971 the word mark was registered in the name of Scandecor Ltd. In August 1976 the logo mark was registered in the name of Scandecor International, the ultimate parent company. In September 1978 Scandecor Ltd assigned the word mark to Scandecor International, which was registered as proprietor in June 1979.

3

Eventually Mr Hjert and Mr Huldtgren fell out. They disengaged by stages, and in 1997 the last contractual ties were severed. Unfortunately, they had made no contractual arrangements for what should then happen about the use of the name Scandecor. These proceedings are the result. Similar proceedings are on foot in other countries. In short, Scandecor Development AB, which acquired the two registered trade marks and other assets of Scandecor International on the latter's insolvency in 1994, objected to Scandecor Ltd continuing to use the word Scandecor as part of its name in connection with the sale of its own posters and calendars. Scandecor Development relied on its rights as proprietor of the two registered trade marks, and commenced these proceedings against Scandecor Ltd for infringement of the marks. The response of Scandecor Ltd was to counterclaim for revocation of the marks, on the basis that they had ceased to be distinctive. Both parties made alternative claims in passing off.

4

The trial judge, Lloyd J, declined to revoke the registration of either mark. He held, however, that Scandecor Ltd was entitled to continue to carry on its business under its existing name. Both parties appealed. Differing from the Judge, the Court of Appeal, comprising Sir Stephen Brown P, and Otton and Mummery L JJ, ordered that the two trade marks should be revoked. Scandecor Development has now appealed to your Lordships' House.

The history

5

The history of this matter, covering 30 years, is complicated in its detail. The detailed facts are set out carefully in the judgment of Lloyd J, reported at [1998] FSR 500. In broad outline, the history can be broken down into four phases. The first phase was from the inception of the business in 1967 to 1979. Throughout this period the Scandecor group was an integrated group, with Scandecor International as the parent company, owned equally by Mr Hjert and Mr Huldtgren.

6

The second phase was from 1979 to 1984. In 1979 a partial division of the group took place. Scandecor International's sales subsidiaries were sold to its founders and co-owners Mr Hjert and Mr Huldtgren. Mr Huldtgren acquired Scandecor Marketing AB, a Swedish company, which in turn acquired the local subsidiaries for the countries for which Mr Huldtgren already had business responsibility. These included Scandecor Ltd in respect of the United Kingdom. A like acquisition was made by Mr Hjert in respect of the countries on the continent of Europe for which he already had particular responsibility. Scandecor International remained jointly owned. Scandecor International retained ownership of the registered trade marks in the different countries. Scandecor International appointed Scandecor Marketing to be its sole distributor of International's products under the name Scandecor in the countries allocated to Mr Huldtgren. Mr Hjert and Mr Huldtgren entered into a co-operation agreement.

7

The third phase covers the ten year period from 1984 to 1994. In 1984 the corporate relationship was finally ended, and the existing agency and co-operation agreements were superseded. Mr Huldtgren sold his shares in Scandecor International to Mr Hjert, so that thereafter Mr Hjert owned and controlled Scandecor International as well as the subsidiary companies he had acquired in 1979. Despite this corporate severance, Scandecor International remained the registered proprietor of the United Kingdom trade marks. Scandecor International appointed Scandecor Marketing as its sole distributor of a range of products, principally posters, in the countries for which Mr Huldtgren had been responsible from the outset. Scandecor Marketing was also entitled to develop and produce pictorially based products of its own, and Scandecor International licensed Scandecor Marketing and its subsidiaries to use the Scandecor mark on such goods within the allocated countries. Pursuant to this licence, from 1984 onwards Scandecor Marketing developed products of its own, chiefly calendars and cards, and sold them under the Scandecor name.

8

The fourth phase was from 1994 onwards. The insolvency of Scandecor International in April 1994 brought to an end the distributor and licence agreement made in 1984 between that company and Scandecor Marketing. No new overall agreement was reached between the two companies. Orders and supplies continued on interim terms. Eventually, negotiations came to an end, and supplies of posters and other products from Scandecor Development to Scandecor Marketing and Scandecor Ltd ceased. Early in 1997 Scandecor Marketing announced that in future it would sell products either published by itself or obtained from other sources. These proceedings were started in July 1997.

9

The Judge made findings regarding the goodwill attached to the name Scandecor. There is no goodwill in this name with the general public. The relevant section of the public with whom this goodwill exists is the United Kingdom retail trade. Retailers choose whether to stock posters or calendars from Scandecor or from one of a number of other suppliers. Naturally, retailers in this country dealt with Scandecor Ltd rather than any other Scandecor company, and they tend to associate the name Scandecor with that company. Scandecor Ltd has a goodwill with its retail customers, based on its efficient service as well as on the products supplied. But the consistent theme of the publicity material put out by Scandecor Ltd and Scandecor Marketing included a regular refrain of 'Scandecor the largest poster company in the world', referring to Scandecor International. As regards posters, Scandecor International enjoyed goodwill as the Swedish publisher and source of the product, and this goodwill was later acquired by Scandecor Development. As to calendars and cards, Scandecor Development has the same goodwill, deriving from the (erroneous) assumption in the market that there is no difference in the source of the different products.

10

On the basis of these facts Scandecor Marketing and Scandecor Ltd advance a case that the two Scandecor trade marks have become liable to mislead the public as a consequence of use made of them with the consent of the registered proprietor. Accordingly they should be revoked, pursuant to section 46(1)(d) of the Trade Marks Act 1994. Scandecor Development is now the registered proprietor of these marks. If the marks are distinctive of Scandecor Development then, at least as regards calendars and cards, the marks have become deceptive because a trade mark must be an indication of origin. But for years Scandecor Development and its predecessor Scandecor International were not the origin of these goods, nor did these companies have or exercise quality control over them. Mr Young QC submitted that if a mark belongs to X but with X's consent it is used in relation to the goods of Y, over whom X has no quality control, the mark has ceased to be distinctive. He described this as the 'golden thread' running through the law relating to registered trade marks. He drew attention to observations by Whitford J, a judge with considerable experience in this field, in McGREGOR Trade Mark [1979] RPC 36, 53:

'…a bare licence under a trade mark has never been countenanced. A registered usership is accepted because … a registered user is going to be subject to the control of the proprietor as far as the quality of the article made by the registered user is concerned. In this way, even if two persons are using a mark - the registered proprietor and the registered user - there is only one source controlling the question of quality; and if a member of the public were interested to find out who bore the ultimate responsibility for the quality of the goods, he or she would be able to do so by inspecting the relevant entries on the register.'

11

Counsel submitted that, so far as bare licences are concerned, that is still the law. The position remains the same under the Trade Marks Act 1994. This submission raises a fundamental question...

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